Bates Worldwide (Ted Bates & Co.; Ted Bates Worldwide)

Founded as Ted Bates Inc. by Theodore Bates, 1940; bought Campbell Mithun, 1979; bought William Esty Co., 1982; changed name to Bates Worldwide, 1983; acquired by Saatchi & Saatchi Co., 1986; merged with Backer & Spielvogel and renamed Backer Spielvogel Bates, 1987; renamed Bates Worldwide, 1994; purchased as part of the Cordiant Communications Group by WPP Group and divvied up among other WPP properties, 2003.

Bates founder Theodore Bates joined Benton & Bowles in 1935 to work on the giant Colgate-Palmolive-Peet account. By 1940, however, both the agency's founders had left, and Mr. Bates opened Ted Bates Inc. with initial billings of $2.9 million from Colgate, which grew to $4.5 million within the first year. Bates went on to build its reputation on hard-sell advertising for inexpensive packaged goods.

Although his name was never on the company logo, Rosser Reeves was the first copy director and chief creative theoretician at Bates. He joined the shop from Blackett-Sample-Hummert in 1940, becoming a partner in Bates in 1942.

Mr. Bates was a cultivated and soft-spoken New England aristocrat who avoided publicity; Mr. Reeves, a flamboyant extrovert with a philosophy of advertising that reduced the main creative function to discovering a product's "unique selling proposition," or USP. USP referred to a promised benefit that only the product in question could deliver. If none could be found, one was invented.

Client roster

Bates handled Colgate dental cream ("It cleans your breath while it cleans your teeth") and Palmolive shaving products, which by 1945 raised the agency's billings to $16 million. Standard Brands, with its Blue Bonnet margarine and Royal desserts, was the shop's second-largest client.

In 1952, Bates became the agency for Citizens for Eisenhower, and Mr. Reeves produced 40 spots in which Gen. Dwight Eisenhower responded to specific questions from typical voters. The saturation campaign came to be known as "Eisenhower Answers America" and represented the first time spot TV advertising was used on such a scale in a U.S. presidential election. ( BBDO was co-agency in the Republican effort that year.)

Top 10 status

Billings surged to $46 million in 1954, as Bates won M&M Ltd., the maker of M&M's candy. M&M's became a classic example of Mr. Reeves' USP system of creating advertising. For the soft chocolate candy sealed in a brightly colored hard sugar shell, Mr. Reeves developed "melts in your mouth, not in your hands," a theme still associated with the brand almost 50 years later.

Important new business pulled Bates into the ranks of America's top agencies by 1956. Anacin, manufactured by Whitehall Pharmacal Co., a unit of American Home Products, became one of Bates' most significant accounts.

Mr. Reeves devised a series of TV spots for Anacin in which three images appeared on the screen portraying different kinds of headache pain that could be relieved by Anacin. One was a hammer banging on a line drawing of a head. The ads promised "fast, fast, fast relief" and claimed, "Anacin is like a doctor's prescription. That is, a combination of ingredients that brings fast relief . . . ."

By 1957, Bates' billings reached $103 million, and about 75% of the agency's work was in TV. Ted Bates moved to the position of honorary chairman, although he continued to work full time. Thomas Harrington became chairman in 1955, but died four months later; Mr. Reeves then moved into the chairmanship.

In the late 1950s, Bates sought unsuccessfully to acquire Masius & Fergusson, an agency handling Colgate in London and the No. 5 shop in England. But in 1959, Bates was successful in acquiring another London-based Colgate shop: John Hobson & Partners, which became Hobson, Bates & Partners. It was Bates' first agency acquisition outside the U.S. and was driven by a need to serve the agency's increasingly global client interests. In 1960 and 1961, Bates bought agencies in Toronto and Paris.

Setbacks

In the 1960s, the U.S. Federal Trade Commission targeted Bates for its work for several clients, including ads that claimed Colgate dental cream covered teeth with a protective shield called "Gardol." It also forced the agency to admit that Carter's Little Liver Pills did nothing for the liver. But perhaps the best-known Bates "deception" exposed by the FTC involved Colgate Rapid Shave, for which a razor appeared to glide over a piece of sandpaper softened by the "super moistening" qualities of the shaving cream. In fact, the "sandpaper" was a piece of Plexiglas, substituted for "technical reasons" to compress the moisturizing time to fit into a commercial.

In January 1962, the FTC cracked down on Bates and Colgate with new rules against misrepresentation that had far-reaching implications for advertising generally. Bates seemed to become a lightning rod for the suspicions of consumer protection groups, and in 1963 the National Association of Broadcasters code review board questioned its long-standing claim that Anacin was "like a doctor's prescription."

In December 1965, the agency celebrated it 25th anniversary. It ranked No. 5 globally with worldwide billings of $207.5 million, of which $180.4 million were domestic. Bates was building a far-flung empire in Belgium, the Netherlands, Sweden, Spain and Japan. Ted Bates remained a hands-on presence, while Archie Foster, who had joined the agency as a VP in 1954, became president-CEO in 1965, launching a third generation of management.

Leadership changes and growth

In February 1966, Mr. Reeves announced his retirement. The following September, Jerry Della Femina took over as Bates' creative director, a move perhaps intended to bring the agency into closer register with the "creative revolution" of the 1960s. But Mr. Della Femina remained only a year before leaving to start his own agency. (Shortly after his departure, Bates surprised both its client and the industry by resigning its signature Anacin account to take on Bristol-Myers' Bufferin.)

Robert Jacoby arrived as a VP in 1965 from the recently merged Needham, Harper & Steers. In December 1969, he became president of Bates' domestic division, and in March 1971, he became president of the corporation, succeeding Mr. Foster, who moved up to chairman. Bates founder Ted Bates died on May 30, 1972. In April 1973, Mr. Jacoby became chief of the Bates holding company, whose total billings had reached $457.8 million; almost 45% of that was business outside the U.S.

The company finished the 1970s with billings of $1.4 billion. Part of that growth was the result of the acquisition of Stern Walters/Earle Ludgin, Chicago, and, Campbell Mithun, Minneapolis (a major General Mills agency), for $130 million. Both acquisitions occurred in 1979. In February 1982, Bates acquired William Esty Co., which added $450 million to Bates' billings.

Esty proved to be the weakest of the properties, and on July 5, 1988, Bates announced it would merge it with Campbell Mithun to create Campbell-Mithun-Esty, with combined billings of $800 million.

Reflecting its global coverage, the name of the agency was changed to Bates Worldwide in 1983, and by 1984 Bates was second only to Young & Rubicam in world income. The agency expanded into the Hispanic market with the purchase of Conill Advertising in 1986 and into direct response with Kobbs & Brady.

Mergers: Done and undone

The management generation that had nurtured the enormous Bates growth (there were 108 offices in 48 countries) now faced a dilemma. As they approached retirement, their Bates stock had risen to a level where it was becoming too costly for the agency to buy it back. This led Mr. Jacoby to seek a buyer for the agency. After a year of negotiations, in 1986 the agency was purchased by London-based Saatchi & Saatchi, which agreed to pay more than $500 million for Bates' stock, more than twice its book value.

Mr. Jacoby personally made $100 million from the deal, and was vilified for it. But the consequences were significantly less beneficial. In June, Bates lost about $300 million in billings from clients that disapproved of the new ownership, such as Warner-Lambert Co. and R.J. Reynolds Tobacco Co. The RJR loss, combined with the simultaneous loss of Nabisco, amounted to approximately $100 million.

There was also a fierce power struggle within Bates and in September, Mr. Jacoby was stripped of his authority and replaced by his former lieutenant, Donald M. Zuckert. Mr. Jacoby left the agency later that month.

On July 16, 1987, Saatchi merged Bates with Backer & Spielvogel, another of its agencies, creating Backer Spielvogel Bates Worldwide. But the parent company had its own problems—including lawsuits, client losses and the departure of founder Maurice Saatchi to form a new agency—that directly affected the fortunes of Bates. The holding company was renamed Cordiant Communications Group. M&M/Mars, reportedly upset at not having been consulted about the changes, pulled $350 million in spending out of Bates, forcing a 3% staff cut at the agency.

In 1994, the Bates-Backer merger was undone and the agency once again became Bates Worldwide. Bates, which had become the chief asset of Cordiant, continued to be the main bait in rumors of a takeover, but the agency celebrated its 60th anniversary in 2000 with total worldwide billings of nearly $7.9 billion. In 2001, it had gross income of $728 million on billings of $6.36 billion.

In 2002, Bates USA, the domestic unit of Bates Worldwide, lost some a significant number of clients, including the $200 million account of Wendy's International, which left the shop in part due to Bates' merger of its media-buying operations with those of sibling Optimedia, 25% owned by Cordiant. Bates' losses continued in 2003 when Cordiant lost Allied Domecq.

In early August 2003, WPP Group completed its purchase of Cordiant Communications Group. Later that month, WPP sold its 25% share of ZenithOptimedia to Publicis Groupe. Bates Worldwide was divvied up among various WPP agencies, such as Red Cell, or in some regions, such as Asia, left as its own entity, Bates Asia.